Revenue in the first three quarters increased by 116.20%, and net profit increased by 92.67%.

Dongan Power achieved revenue of 1.771 billion in the first three quarters of 2016, up 116.20% from the same period last year, and net profit of 71.79 million, up 92.67% from the same period last year. According to the split reporting period, Q3 achieved revenue of 573 million in 2016, an increase of 170.78% over the same period last year, and a net profit of 16.14 million (a loss of 30.17 million in the same period last year).

Q3 profit is slightly lower than expected, but still maintains a high year-on-year growth rate

In terms of subdivision, in 2016, Q3 Dongan Power achieved a net profit of 5.98 million and an investment income of 10.16 million (mainly Dongan Mitsubishi). Among them, the headquarters reversed losses compared with the same period last year, continuing the positive growth in the second quarter, but its profitability declined; Dongan-Mitsubishi net profit increased significantly compared with the same period last year (15-year Q3 low base or increased sales expenses for the 4G152M recall). To sum up, Dongan Power achieved high year-on-year growth in revenue and profits in the third quarter, but profitability declined compared with the second quarter, resulting in third-quarter results falling short of our previous expectations. The reason why the performance is slightly lower than expected is mainly due to the increase in manufacturing costs caused by the expansion of production capacity and the adjustment of production lines under the hot sales of the company's products (the operating cost of Q3 is 3% higher than that of Q2, and the terminal price of the product is basically the same).

Q3 engine sales increased by 190.6%, helped by downstream customers' hot-selling models in Changan.

Sales of Q3 engines were 73000, up 190.60 per cent year-on-year, while Dongan-Mitsubishi sold 90000, up 46.6 per cent. The main source of sales growth in this part is the new model Changan Auchan (29000 Q3 sales), and the main growth source of Dongan Mitsubishi sales is the new Changan CX70 (Q3 sales 26000). At the same time, BAIC Weiwang M30 promotion offer in September, monthly sales of 14000 vehicles, back to the growth channel. We believe that due to the concentration of year-end promotional activities in the car market, the purchase tax relief policy or the adjustment of expectations at the end of the year will promote advance consumption in the passenger car market. At the same time, Auchan's production capacity may be further expanded, and the downstream matching capacity of Dongan Power is expected to continue to grow in the fourth quarter, with a high probability of profit improvement.

Risk hint

In the fourth quarter, the car market may not meet expectations, and 6AT products may not meet expectations.

Short-term optimistic about fourth quarter sales, long-term optimistic about the landing of 6AT, maintain buying

In the short term, the end of the year purchase tax cut-off is expected to continue to improve downstream customer production and sales, Dongan Power's profit in the fourth quarter is likely to improve; in the long run, 6AT may be supported by Zhongtai next year, and future growth is expected. Taking into account the increase in manufacturing expenses in the third quarter, we lowered our performance forecast and forecast that in 16-17-18, the annual EPS is 0.24, 0.30, 0.37 yuan, respectively, and the corresponding PE is 50.3, 39.2, and 31.7 respectively. Maintain a "buy" rating.